Russia Annexes Crimea, Experiences Economic Fallout Due to Sanctions

On March 1, 2014, Russian president Vladimir Putin dispatched troops to Crimea, citing the need to protect Russians from extremist ultranationalists, referring to the anti-government protesters in Kiev. The Russian troops surrounded Ukrainian military bases, and by March 3, Russia was reportedly in control of Crimea. The move sparked international outrage and condemnation just days after Russia successfully hosted the 2014 Winter Olympics in Sochi. President Obama called the move a "breach of international law."

In a press conference on March 4, Putin said he didn't see an immediate reason to initiate a military conflict, but Russia "reserves the right to use all means at our disposal to protect" Russian citizens and ethnic Russians in the region. Two days later, the U.S. imposed sanctions on officials, advisers, and other individuals who have been involved in the undermining of democracy in the Crimea. The sanctions involved revoking visas for travel to the U.S. for those who hold them and refusing visas for those seeking them. On the same day, the Crimean Parliament approved a referendum, scheduled for March 16, asking voters if they want to secede from Ukraine and be annexed by Russia.

Nearly 97% of voters in Crimea chose to secede from Ukraine in the referendum on March 16, 2014. The next day, the Crimean Parliament declared the region independent and formally sought annexation by Russia. In a statement from the Kremlin, Putin said, "The referendum was organized in such a way as to guarantee Crimea's population the possibility to freely express their will and exercise their right to self-determination." Obama told Putin that neither the U.S. nor the international community would recognize the results of the referendum. He said the referendum "violates the Ukrainian Constitution and occurred under duress of Russian military intervention." On March 17, Obama imposed economic sanctions on 11 Russian officials and Putin advisers, including Crimean prime minister Sergey Aksyonov, who were "responsible for the deteriorating situation in Ukraine." The sanctions froze the assets held in the U.S. and banned Americans from doing business with those sanctioned.

On March 18, Putin signed a treaty stating that Russia had annexed Crimea, reclaiming territory that was part of Russia from 1783, when Empress Catherine II took it over from the Ottoman Empire, to 1954 when Nikita Khrushchev transferred the region to Ukraine. After signing the treaty, Putin gave a speech that both defended his move, denounced internationally as a land grab, and lashed out at the West. "Our Western partners have crossed a line," he said, referring to the West's support for Kiev. "We have every reason to think that the notorious policy of confining Russia, pursued in the 18th, 19th and 20th centuries, continues today."

The move certainly jeopardized Russia's relationship with the U.S. and Europe, and complicated any hopes for a peace agreement in Syria and cast a cloud over the talks over Iran's nuclear program. Neither the U.S. nor the European Union recognized Crimea as part of Russia. The members of the Group of 8 industrialized nations announced on March 24 that they had suspended Russia from the group and moved the upcoming meeting from Sochi, Russia, to Brussels. The UN General Assembly passed a resolution on March 27 that declared Russia's annexation of Crimea illegal and described the referendum on the issue as "having no validity." One hundred countries voted in favor, 11 voted against, and 58 abstained. The resolution has no enforcement power, making it symbolic. Nonetheless, it clearly sent Putin a message.

After annexation, Putin continued to deploy as many as 40,000 Russian troops on the southern and eastern border with Ukraine, areas that are dominated by ethnic Russians, raising fears that he may attempt to take over additional regions of the country. Those fears were realized in early April, when pro-Russian protesters and armed militants in the eastern cities of Donetsk, Kharkiv, Luhansk, and Mariupol took over several government buildings and police stations. On April 17, 2014, in Geneva, representatives from the U.S., Russia, Ukraine, and the European Union reached an agreement intended to de-escalate the tension in eastern Ukraine. The agreement stated that all illegal armed groups will lay down their arms and all buildings seized illegally will be surrendered. Both sides agreed to end the violence and intolerance, with anti-Semitism being singled out. However, Russia did not commit to withdrawing the 40,000 troops it has massed on the Ukrainian border.

In response to Russia's refusal to comply with the agreement reached in Geneva to rein in the pro-Russian groups, the U.S. imposed additional sanctions in late April on seven Russian individuals, including Igor Sechin, the head of Russia's largest oil producer, and 17 companies with close ties to Putin, targeting some of the country's wealthiest and most powerful businessmen. The sanctions, announced on April 28, put a travel ban on the individuals and froze the assets of the officials and the businesses. They also restricted the import of U.S. goods that could be used for military purposes. The European followed with similar sanctions and the U.S. added more sanctions at the end of the year. The sanctions took a toll on Russia's economy. Standard & Poor's downgraded Russia's credit rating, leaving it just one notch above junk status, investors withdrew about $50 billion from the country, and the stock market fell 13% in 2014.